Saturday, November 7, 2015

Businesses should not be able to restrict customers’ speech

Are there limits to what a company can put in a standard form
contract, like a click-through agreement? Can a company take away its
customers’ freedom of speech?
The Consumer Review Freedom Act, now pending in Congress (S.2044, H.R.2110), would limit several ways that companies attempt to keep their customers from criticizing them on the Internet.
The first route vendors take is adding clauses to their form
contracts that say that customers can’t write negative reviews of them
online. Every few months, stories about these clauses go through the
news cycle. Perhaps you heard last year about Union Street Guest House,
a hotel whose standard contract for weddings included a $500 fine for
every negative review left by any member of the wedding party. After
what sounds like a disastrous weekend, the hotel threatened to keep
several thousands of dollars from the couple’s deposit on account of
their guests’ reviews.
The other way that a company might use form contracts to silence its
customers is a little more complicated. The company uses a clause that assigns the copyright for any review customers might write to the company. Then, when the company finds a review it doesn’t like, it files a DMCA notice to take the content down. A few years ago, we wrote about Medical Justice,
a company that advised doctors to use that tactic. We thought then—and
still think now—that it’s an offensive practice: not only does it
unfairly seek to restrict patients’ freedom of speech; it does it
through a gross misuse of copyright law. (There’s a great resource
called Doctored Reviews with more information on these contracts, and advice for doctors on how to respond to negative reviews ethically.)
For any customer-vendor agreement that one party can’t realistically
negotiate or make changes to, the CRFA would void any clause that:

Is the CRFA necessary?

Here’s the thing about these anti-review clauses: they’re probably
already unenforceable. When the clauses are challenged, courts have
reliably sided with the customer.
Here’s the other thing about them: for some reason, vendors keep using them.
Earlier this year, the U.S. District Court in New York City forced dentist Stacy Makhenevich to pay back the $110,000 she’d billed patients under the Medical Justice contract. In 2013, the U.S. Department of Health and Human Services ordered a doctor’s office
to quit using a “mutual agreement to maintain privacy.” Stunningly, the
office had told patients that it would comply with its own
confidentiality policies only if they signed an agreement not to post
negative reviews.In another high-profile case, a couple in Utah sued Internet retailer KlearGear over the $3,500 fine it had charged them for writing a negative review. The judge awarded them over $300,000. (Californians used the case as a call to arms to pass a state law similar to the CRFA.)
As for the Union Street Guest House, that case didn’t even need to go
to court. The Internet’s attention was enough to get the hotel owners
to back down. As you’d expect, whenever one of these stories blows up in
the media, it provides for ample schadenfreude on the vendor’s Yelp profile.
The specifics of these cases vary, but they all turn on the legal
concept of unconscionability. Under this doctrine, if you and I enter an
agreement in which I have all of the control over the terms of the
agreement—and the terms are overwhelmingly stacked against you or
conceal an unfair surprise via fine print or legal jargon—those terms
might not be enforceable.
So why do vendors keep using these agreements? Because they work,
apparently. When presented with a legal-sounding threat from
legitimate-seeming company, a lot of people give up. There are many
stories that never make it to a courtroom or show up on the front page
of Consumerist, stories of customers that hurried to pay that fine or
delete that review. Because legal gray areas are fertile ground for
legal bullying, the law should make it very clear that customers have
every right to speak their mind, even if a company’s form contract says
otherwise.

A good bill with a few bugs to fix

It’s great to see Congress addressing skeezy non-disparagement
clauses. We think that with a few changes, the CRFA could be an
excellent reform.
The greatest problem with the CRFA is a carveout that allows abusive
form contracts to transfer ownership of the customer’s copyright in
certain conditions. Both bills make an exception for “unlawful” speech.
So under the law, a business could use a contract that transfers
copyright of reviews if it asserts that those reviews are unlawful.
Businesses could effectively use this loophole to bypass the
traditional protections that cover speech offenses, such as defamation,
by using the more powerful censorship tools available to copyright
owners. For example, the DMCA’s notice-and-takedown regime
provides an easy way for a copyright owner to demand that an online
platform remove user content, and the platform must comply if it wishes
to maintain its safe harbor against potential copyright liability based
on that user content. Plaintiffs alleging that speech is defamatory or
otherwise harmful ordinarily have no such tool for censorship. If
censorship is available as a remedy, it will come only after a judge hears the arguments.
Copyright law also comes with the potential for astronomical statutory damages that have no relation to any harm caused by infringement.
The language about unlawful speech in the bills would seriously upset
established law regarding speech offenses. We suspect this was
unintentional, but it certainly should be removed before the bill moves
forward.
Reading the House and Senate
bills closely, we also found some potentially troubling language in the
Senate version: “It shall be unlawful for a person to offer or enter into
a form contract containing a provision described as void…” (emphasis
added) That language could seemingly be used to penalize the individual
consumer who entered into one of these contracts unknowingly. The House version is superior in that it makes it clear that individuals
would not be punished for accepting a form contract, but it should
clarify that someone who accepts a form contract on behalf of a business
does not create liability for the business.

It’s time to kill unfair contracts

This is the second time the CRFA has been introduced in Congress.
We’re glad to see it back: despite the problems with the bill, it’s
great to see lawmakers addressing some of the most overtly unfair
contract clauses.
The law should make it clear that user freedoms—like the ability to
criticize a business—trump the words in a click-through “agreement.” We
hope the CRFA is only the beginning of a broader effort to protect user
freedoms from these one-sided contracts.